BLACK FRIDAY? - 05 Aug 2011

reply to post by getreadyalready


This theory of yours makes a WHOLE LOT of sense. I never considered it. Very intuitive of you!!!

S&P downgrades U.S. Govt. after hours from AAA to AA+ with negative outlook.

I thought markets were supposed to be forward looking so it seems a bit strange that the price of US Govt. debt is at a 60-year high when rating agencies start their downgrading process. U.S. will probably be knocked down 2-3 pegs at least in the next year.

So. Get ready for War again?

reply to post by galdur


Crap. I don't know what else to say, but Crap.
I would say "Oh My God - I can't believe we've been downgraded", but I figured it was coming.
Still sucks to actually see it happen. Hopefully it will all be for the best in the long run.
My 19 year old son just called me and asked what that meant, and why were they announcing it on a Friday, and what was going to happen.
I told him it would be the same if he, on his salary, went out and got loans and bought a house he couldn't afford, along with a bunch of furniture he couldn't afford, and a few cars he couldn't afford. And then got a bunch of credit cards to help him pay for all of the other stuff. Eventually, if he didn't quit spending so much and didn't make any more money, he wouldn't be able to pay for the credit cards, not to mention the house, the furniture or the cars. Something would have to give.
I told him I figured they announced it Friday night so the stock market would have the weekend before it really tanked hard. Harder, I guess considering the last couple of days.
As far as what is going to happen - I'm not sure what to tell him. I don't really know - I'm 39 - I have never experienced this before. I know what would happen to an individual, but not to a nation.
I hope I explained this to him correctly - any economic people out there have any advice? Was this a good analogy?

Originally posted by area6
Friday's Dow close ... +100 to -200 ... in there somewhere.

You heard it here

That was my call yesterday.

So what do we got for Monday ... US credit rating drop is ... well let's just call it a "risk bubble" to drive up the price of US treasuries since they're the hot commodity right now.

Can't call Monday yet. Have to look at this more in depth.

Market internals are seriously damaged.

It´s much worse than iss reflected in the movement of the indices as such.

Friday a whopping 1300 stocks hit a new low. It´s a bloodbath and it´s likely to continue.

This whole thing is like a bad car accident that I've seen coming for months and months but can't do anything about.

wanted to post a reply that would convey
how i feel right now about our situation...the
politics, the banks, the wars, the economy...was
looking for something that covered it all...

I wonder if any of the nations we have been
pouring funds into over the past several decades
would return the favor...

and I usually look forward to mondays

I say let it crash, hard and then let it burn. I will be glad to put some cash into the fire to literally burn. The US deserves its credit downgrade. They did this to themselves. Personally they got lucky. It should have been downgraded even more. The S&P basically said it lost faith in the US government to stabilize the nation: Full text of S&P statement on US downgrade

Got money in the markets? Get it out. If it all collapses even gold will be useless.

If anyone gets ticked about this, think about the downgrade like this...

Imagine for a moment you carried a $14 trillion dollar debt, and the only thing you do is pay off the interest rate. As time keeps moving forward, you keep raising your debt limit to borrow more. Even though you may be paying the interest on your loans (or credit cards), you never-ever pay anything onto the principle balance.

Now, you wake up one day, and you notice something is wrong. After checking your revenues (GDP and Taxes), you realized that they total exactly how much you owe in debt. Since you need those revenues for something else (social services, government paychecks, etc...), you cannot tap enough of it to pay the interest on outstanding loans. As your loans keep gaining in interest, the amount you take in can no longer cover the minimal payment. Other words, the interest on your loan starts to outweigh your assets and revenue.

What that all means is simple. If you cannot cover the minimal balance due each month (the interest), you will never be able to pay anything on your loan's principle.

Technically, raising your credit limit (debt ceiling) ended up breaking the bank, for it caused the interest rate on your credit card (loans to other countries) to be raised at the same time.

More money you borrow = the more interest you owe.

On top of all this crap, you have domestic liabilities to pay. Employees, telephone, power, water, roads, health care, health care for employees, social services, defense, etc... So, what gets cut from your liabilities, so you can start paying off the principle balance of your loans? Your bank (China) is now screaming for a repayment on your loans. What do you do?

I am surprised the S&P dropped the credit rating to an AA+.
I would have lowered the credit rating to at least a C+.

Originally posted by woodwardjnr
There is no way of getting out of this situation unless we come up with some new type of technology's or anything really that we can sell. We have nothing left in the west, we dont make anything. The UK relies on the financial institutions for the majority of its income. It does not create things or jobs, just imaginary money on a screen. I dont know what the solution is. Massive cuts in public spending can only go so far. Our economies rely on people consuming things. If no one has any disposable income then the consumption stops, which means more business closures, more unemployment.

It's easy to get depressed over the future, but from personal experience a positive mindset will be essential to get through this. Negativity will just make things worse. There is only so much you can personally do about this situation, a negative mindset and worry will lead to despair, a positive mindset will always remain hopeful.

great post/attitude (star for you). we have plenty of new techs, especially green/ clean energy ones.Too bad all the really good techs/ideas are suppressed by TPTB. Seems like the entrenched corporations (big oil etc...) would rather keep making billions on the same bad ideas. Maybe someday somebody will figure a way around them and get our economy really fired up while making the world a better place. Until then...we can dream (it's still legal ...I think)

What do banks do when you can no longer pay the minimum due on credit cards, mortagages, etc? They foreclose... they take your stuff. What will China do when the U.S. can no longer pay the minimum due (interest) on the debt? They will foreclose... they will take the U.S.'s stuff. What is that "stuff"?

Looking more like a Black Monday... dow down nearly 3% 330 down as of right now.

Things are not looking good. I have only started to look at the market recently, I have always been of the opinion it is a rigged game, so i have always found other ways to invest my money.

Can somebody comment on todays market turn?

I have been reading that monetary inflation plays to drive the market up. Will this be the beginning of QE3?